“Challenges and Managing Strategy for

Operated & Non-operated

Overseas E&P Assets”

Biswajit Roy
Director (HR&BD)
Oil India Limited

Strictly Private and Confidential

E&P Assets Overseas: Why overseas? – The Drivers

• Depletion in old fields

• Not much of new findings
Internal • Availability of funds
• Desire to grow

• Public Sector Units / Private Players

• National responsibility
• To play a key role in Energy Security
• Hydrocarbon Vision 2025
• To implement new emerging technology
External • New oil in old fields / New oil in new fields / altogether new
oil
• To get into new areas
• By Overseas Acquisitions
• Hedge risks via Geographical domains
E&P Assets Overseas: Benefits
Direct benefits
• Supplement domestic reserve
• Repatriation of profits
• Equity oil and gas
• Multiple source of
dependency.
Indirect benefits
• Operatorship/Developing new
expertise
• Exposure to other Indian
Companies
• Emergence as global energy
players
• Leverage financing risks in
E&P investments & access
international finance
3
E&P Assets Overseas: Developing / Managing Portfolio
Approach for reassessing a portfolio or developing a fresh portfolio
remains same
For companies which have ventured out
• Have a portfolio of assets

Companies which would like to venture out

• To develop a portfolio

Every company needs some lenses and dimensions for deciding/rectifying

the path for an efficient portfolio
 E&P Assets Overseas: Macro factors for Portfolio
Portfolio is a compilation of tangible and intangible assets
• Contracts / licenses / Subsurface
• A number of variables, long time horizon and high uncertainty
Geographies unwanted by people
• In house experts may be unwilling
• Project execution through in house or through contracts
Different fiscal parameters for measurement
• Understanding by pure financial indicators like NPV and IRR may not be practical
• Operational parameters like per bbl numbers, reserve replacement ratio etc should be the focus.
Oil field services costs / project costs are highly cyclical in nature
• Big players, made up costs
• Impacted by various factors like inflation, geopolitical situation etc.
Days of easy oil are gone
• Finding oil by the best use of technology
• New oil in new field / Old oil in old field / new oil in old field
HSE
• Huge impact
• Fundamental, Inherent and in culture.
 E&P Assets Overseas: Direct Outcome of Corporate Strategy
• Recognising, measuring and managing the uncertainty of various portfolio elements
Uncertainty • Bridging between technical and financial lenses

Capital • Deciding where to allocate capital across the various asset types and maturities
allocation • Changing the emphasis of capital allocation in response to the business environment

• Understanding complex and in-transparent competitive processes

Acquisition • Creating and implementing a bid strategy based on your own competitive advantages

• Valuing assets by recognising all elements of financial, operational and strategic

Asset value
valuation • Understanding and predicting competitor valuation

• Understanding the behaviours of new competitors who may appear not to behave
Competitors rationally –e.g. attitude to risk, time horizon, expected financial return

Portfolio • Deciding along which of the many lenses to orient the portfolio –Geographic, oil or
Strategy gas, technical attributes, partner-oriented, market-oriented etc
 E&P Assets Overseas: Various dimensions
-Region
-Country
Geography -Market/basin
-Geopolitical Risk
-Political risk
-Technology risk

Risk Technical

-Hydrocarbon type
-Fiscal Regime -Production
-Maturity environment
-IRR -Reservoir type
-Oil Price sensitivity -Specific technology
or skills
Operation / -Integration
Financial
Partnership

-Relationship-driven
portfolio
 E&P Assets Overseas: Various dimensions - Details
• Concentrated vs. dispersed
• Local vs. international
Geography • Market-led developments
• Basin-led developments

• Oil/ gas/ heavy oil/ Onshore / Offshore/ Deepwater

• Sedimentary / Carbonate
Technical • HP/HT / Conventional / non conventional
• EOR / Advance drilling / Integrated (E&P, Downstream) vs pure E&P

• Focus on relations with NOCs, Governments or other oil companies

Operatorship • Operator vs non-operator

• Taxes / Royalties / PSCs

• Capex intensive vs. Cash cow
Financial • High / low return vs risk
• Upside & risk exposure

• Concentrated vs dispersed
• Exposure to volatile countries / regions
Risk • OECD / Non-OECD Production
• Proven technology vs technology -driven
E&P Assets Overseas: Challenges
Surface
• Known
• But less control
• Depends on geographies and Geography
politics therein.
• Finding the right partner for developing a new skill or getting into the right
asset.
• Clear knowledge of fiscal regime is difficult.
• Historic behaviour of the nation before acquiring the asset
• Changing regulatory framework
• Overall geopolitical scenario
• CrudeRisk Technical
oil price / Exchange rates / Costs / Diplomatic relations
• Production, marketing and monetization environment.

Subsurface
• Unknown
• Address them with knowledge base and experience
• By internal expertise
• By partnering an expert
• Understanding type of hydrocarbons, possible ways of
monetization. Operation /
• Financial
Understanding the type of plays, developing the required skill set
for those plays. Partnership
• Either the acquired assets should complement the in-house expertise
or it should be an strategic wish to develop that expertise
 E&P Assets Overseas: Portfolio Evaluation- Asset by Asset
Technical Fit Value Fit Asset’s role in
Portfolio
• Reserve • Returns
• Production profile • Breakeven
• Development concept • Costs
• Technical learning

Turnaround

Grow
Portfolio and
Strategy
Understanding Acquire

Strategic Fit Synergy Fit Divest

• Core competence • Complementing / Mutual gains
• Strength • Suits cost and revenue
• Upsides and growth potential
• Supports
 E&P Assets Overseas: Positioning the assets
1. Investment in growth
opportunities
• Acquisition / Exploration opportunities / New asset
Development Projects
• Invest • Grow
2. Develop core assets
• Maximize revenues from growth Deepwater

M a t u r i t y
assets Angola GoM /
• Seek and execute incremental Caspian
extension

3. Maintain and Manage maturing

assets North Sea
North Sea Oil
• Maintain plateau Gas / GoM
/ Russia
Shelf
• Monitor decline
• Manage costs
• Divest • Harvest
4. Divest and abandon assets
• Manage decline
• Monitor economics Cash generation
Matured asset
• Select economic exit options

Negative Positive
 E&P Assets Overseas: Positioning the assets
1. Investment in growth
opportunities
• Acquisition / Exploration opportunities / New asset
Development Projects
• Invest • Grow
2. Develop core assets
• Maximize revenues from growth Deepwater

M a t u r i t y
assets Mozambique
Angola Brazil
GoM /
• Seek and execute incremental Caspian
extension

3. Maintain and Manage maturing

assets North Sea
North Sea Oil
• Maintain plateau GasUSA
/ GoM Algeria
/ Russia
Shelf
• Monitor decline
• Manage costs
• Divest • Harvest
4. Divest and abandon assets
• Manage decline
• Monitor economics Cash generation
Matured asset
• Select economic exit options

Negative Positive
E&P Assets Overseas: Role to be played by the company

Operator or non-operator?
Expertise, strength and vision

As Operator As Non-Operator

Venture in
assets which
Never be a
Venture in needs
Same sleeping Risks and
assets which expertise
dimensional non- Impact are
needs in- which
lenses to be operator, be similar to
house company
used an active operator
expertise desires to
non-operator
develop
E&P Assets Overseas: Overall Portfolio Strategy

Geography

Risk Asset1
Technical
Asset2

Asset3

Subsurface Surface
Challenges Challenges
Selected Assets

Operation /
Financial
Partnership
Thank you